An Airline Overbooking Policy

Abstract
The paper presents a model for determining an overbooking policy for an airline. Of the three criteria chosen, the first two ensure that the probability of a rejection and the expected rejection level do not exceed given limits, and the third determines the loss incurred by rejecting a passenger relative to the profit of carrying one, thereby permitting maximization of the expected gain. The following three cases are considered: (a) Single-leg flight carrying a single type of passenger; (b) Single-leg flight carrying two types of passengers, and (c) Two-leg flight. It is assumed that all types of passengers generate the same profit for a given flight-leg, and differ only in probability of cancellation.

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